Aoyama Sogo Accounting Firm

Innovation Speed Quality

Vol.02C h a i r m a n ’s

7/ 30/ 2021

C o l u m n

Our Sustainability Policy
Aoyama Sogo Accounting Firm (ASA) recently renewed its website. Taking this opportunity, we belatedly added a"sustainability policy." This policy was prepared based on the concept of ESG.
The Covid-19 calamity provides a good opportunity for us to think again about business continuity. Since ASA is focusedon managing investment projects in alternative asset classes, it would be a disaster if we could not contact, for somereason, the parties concerned to inform them of unexpected changes in circumstances around an ongoing project or toremit money.
In order to avoid such an unfavorable situation, we have been focusing on seamlessly providing our service to clients bykeeping the best possible proportion between working from home and working in the office and confirming the progressof work. What should we do if somebody else in Team ASA tested positive for Covid-19? -- I think that it is essential torespond to the worst possible case keeping in mind that nobody is exceptional.
Although what a company with about 200 people can do may be limited, I myself should
study and learn SDGs and ESG first of all, and then ask clients what their basic policies areand understand those policies in order to support their progress as much as possible.
（Kazuhiro Matsuzawa, Representative Director and Chairman)

Renewable Energy Information
Estimates for Power Generation Costby Source in 2030
On July 13, the Ministry of Economy, Trade and Industry (METI)
announced, based on a certain formula, estimated costs per kWh
in 2020 and 2030 incurred if a new power plant is built on avacant land and operated there.
According to the estimates, the expected lowest costs per kWh in
2030 are in the range from 8 yen to less than 12 yen for solar
power (for business use), and in other major sources, 11.5 yen or
higher for nuclear power, from 13.5 yen to less than 22.5 yen forcoal-fired power and from 10.5 yen to less than 14.5 yen. The
estimates for 2030 obtained by MITI through a similar calculationin 2015 were in the range from 12.5 yen to less than 16 yen forsolar power and from 10.5 to less than 11 yen for nuclear power.
Given that the cost of nuclear power had been expected to belowest at that time, the recent numbers showed a reversal insolar power and nuclear power.
The main factors for price fluctuations of solar power and nuclear
power include the cost reduction of panels and non-panel
equipment/facilities for the former and the cost increase due toadditional safety measures for the latter. For solar power, afurther reduction remains possible since the generation cost inJapan is higher than the international average.
The results of the estimates for generation
cost by power source are considered oneof the inputs to determine issues in energy
policy measures toward 2030 such as
which sources Japan should pay greaterattention to based on the characteristics
of each source.

Meanwhile, METI says that the results will be different if it
adopts different factors for the estimates such as those forfuel costs and others, operating year length and capacity
factors of facilities, and the volume of solar power
introduced.
Under the feed-in Tariff (FIT) scheme introduced in July 2012,
the purchase price of renewable energy per kWh (forbusiness) was initially determined to be 40 yen andcontinued to decline every year to 36 yen, 32 yen, and 11yen in the current 2021. About four years ago, I heard froma client that "we can generate profits if we can sell at 36yen/kWh, but it’s a little bit difficult at 32 yen/kWh. Iflower than that, it’s quite difficult." From this comment,
the current 11 yen/kWh must be extremely difficult. But on
the other hand, considering that the number of renewableenergy projects has not declined (but rather increased)
despite such difficult purchase prices, it is likely that astructure which allows power generators to be profitable
due to cost reduction in panels and otherequipment/facilities, etc., is being continuously developed.
If the generation cost for solar power is controlled to belower than that for nuclear power as shown by the above
estimates, the usage of nuclear power is expected to bepromoted further in policy measures in combination withcarbon-neutral activities. Like others, we used to engage inprojects using the FIT scheme, but recently see an increasein the number of non-FIT projects while electricity-sales
prices and types of agreements are changing. I think that itis necessary to keep an eye on future trends in therelationship between costs and profitability since securing
profits is likely to become a matter of greater concern.
(Hirokazu Ando, Executive Manager )Copyright(c)2021 Aoyama Sogo Accounting Firm Co., Ltd. All rights reserved.

Aoyama Sogo Accounting Firm

Innovation Speed QualityVol.02

7/ 30/ 2021

R e a l E s t a t e M a r k e t
I n f o r m a t i o nGerman Open-ended FundThe other day, it was reported that a major German open-ended fund had invested in Japan for the first time in quite a while.
To begin with, several open-ended funds -- most of them German -- were actively investing in Japan until ten years ago, but withdrew fromthe country all at once shortly after the Great East Japan Earthquake. They were a group of investors who invested in offices andcommercial real estate for the long term with abundant funds and attracted much attention accordingly...
At that time, I was in charge of cross-border investments at a real estate company affiliated with a financial institution and got to know amajor German open-ended fund at “MIPIM,” the international real estate trade fair held in Cannes. My family got along with the person in
charge of the fund and his family who were stationed in Tokyo.

When the Great East Japan Earthquake struck, I immediately contacted the person in charge but hesaid that the fund had already decided to withdraw from Japan and he and his family would leave
Japan soon. In Germany, which had experienced radioactive contamination as a result of theChernobyl accident, the Fukushima nuclear accident seems to have been taken quite seriously.
It is often said that the real estate cycle in Tokyo is ten years long, and seeing that the German fundcame back to Japan exactly 10 years later, I chuckled to myself, confirming that, no doubt, they are“Germans who are so strict about time.”（ Sigeru Hirai, Client Relations Group)

Tax-related Topicfor This Month

Global Real Estate NewsRegarding the Revision of the Start of Application ofthe Ratio Equivalent to Taxable Sales Ratio

U.S. Life Science Sector’s Rapid Rise
The global pandemic has temporarily stalled or ended business in many
U.S. industries, but one sector that has blossomed is Life Sciences. A
report by real estate firm Jones Lang LaSalle discusses the rapidly growing
sector that includes pharmaceuticals, therapeutics, and immunology. Even
before the pandemic, U.S. leasing vacancies of life science buildings
decreased from 9.8% to 7.3% during 2015 to 2020.
More than ever before, venture capitalists and institutional investors areinfusing capital in the field as AI and computer science propel R&D at an
unprecedented speed. As firms receive this influx of money, they need lab
and office space fairly quickly, contributing to higher occupancy and new
construction of life science facilities.
In 2020, alternative investment manager Blackstone invested $16 billion inLife Sciences, their largest private equity investment area for the year.
According to the report, the exciting news is that a whole economy is built
around such facilities. Lab workers typically are well paid and stay long attheir firm, meaning stable rental income can be projected for property
owners. In addition, a whole range of support jobs are created including
facility maintenance and other blue collar jobs. This leads to demand for adiverse range of property types including affordable housing, restaurants,and public transportation.
In the U.S., as established innovation districts like Kendall Square inCambridge, MA illustrate, two key factors are critical to building andsustaining such life science ecosystems. One is the sustained investments
by VCs and institutional investors to construct new facilities and housing,and carry firms through clinical trials. Another is the presence ofuniversities and research resources available to firms in proximity. One
can say that both factors are symbiotic in nature, and both vital to allow
the birth of startups and further growth of the sector.
（ Yuichi Totani, Client Relations Group)

In the 2021 tax reform, the provision for the application of theratio equivalent to the taxable sales ratio was revised in favorof taxpayers.
If a taxpayer calculates the creditable tax amount on his/herpurchase based on the itemized method, he/she is supposed tocalculate expenses incurred both in taxable sales and non-taxable
sales according to the “taxable sales ratio.”
But if the proportion of taxable sales and non-taxable sales in acertain business year significantly varies from those in usual periods
reflecting land transfers that happened to be made in the saidbusiness year, the credible amount for taxable purchases will begreatly reduced since non-taxable sales become large if left as is.
Since this is extremely disadvantageous to the taxpayer, he/she isallowed to calculate the credible amount using the "ratio equivalent
to the taxable sales ratio" instead of the "taxable sales ratio".
However, when a taxpayer transferred land near the end of a certain
business year, he/she sometimes could not use the "ratio equivalent
to the taxable sales ratio” since approval from the district tax officedirector was required by the last day of the taxable period in which
he/she wanted to use the ratio.
To deal with such a case, if the taxpayer submits an application for
approval for the use of the “ratio equivalent to the taxable sales
ratio" by the last day of the taxable period, he/she is allowed to use iton the condition that he/she receives approval from the district tax
office director by the day when one month has passed after the last
day of the taxable period in which the land transfers were made.
This revised provision will be applied from the tax period ending onApril 1, 2021.

(Harutomo Yamasaki, Tax Consulting Group)
Copyright(c)2021 Aoyama Sogo Accounting Firm Co., Ltd. All rights reserved.